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Gaining Ratio is Applicable for:
  • a)
    For the distribution of Reserves and profits
  • b)
    For Revaluation
  • c)
    Retiring partner’s share of goodwill only
  • d)
    For the Calculation of profit
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Gaining Ratio is Applicable for:a)For the distribution of Reserves and...
The main purpose of calculating gaining ratio at the time of retirement of a partner is to adjust his amount of goodwill. After calculating his share of goodwill, gainer partners will be debited and outgoing partner will be credited.
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Gaining Ratio is Applicable for:a)For the distribution of Reserves and...
A) For the distribution of reserves and profits: Gaining ratio is applicable when partners decide to distribute the accumulated reserves and profits of the partnership. The gaining ratio is used to determine how much each partner will receive based on their share in the partnership.

b) For revaluation: Gaining ratio is also applicable during revaluation of partnership assets and liabilities. When there is a change in the value of assets or liabilities, the gaining ratio is used to adjust the capital accounts of partners to reflect the new values.

c) Retiring partner: Gaining ratio is used when a partner retires from the partnership. The gaining ratio is used to calculate the share of the retiring partner in the partnership's assets and profits. The remaining partners will absorb the share of the retiring partner based on the gaining ratio.
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